Halliburton bribe case haunts Cheney
By Jason Leopold
Online Journal Contributing Writer
Apr 30, 2008, 00:22
Dick Cheney�s tenure at Halliburton ended eight years ago,
but a federal investigation of alleged bribes from a company subsidiary to
Nigerian officials lingers from the Cheney era, raising questions about what
the vice president knew or should have known.
In its quarterly filing to the Securities and Exchange
Commission on April 25, Halliburton said the Justice Department was widening
its probe to determine whether Kellogg Brown & Root (KBR) paid $180 million
in bribes to Nigerian officials to win a $5 billion construction contract for
the Bonny Island natural gas liquefaction plant.
Halliburton also said the Justice Department is
investigating whether bribes were paid to Nigerian officials relating to KBR�s
construction of an offshore platform. The bribes allegedly went to the
notoriously corrupt Nigerian dictator Sani Abacha and some of his subordinates.
The Justice Department "has evidence of payments to
Nigerian officials by another agent in connection with a separate KBR-managed
project in Nigeria called the Shell EA project," according to a footnote
in Halliburton�s SEC filing.
The footnote�s reference to Shell was the first time the
petroleum giant was linked to the bribery suspicions. Representatives from
Shell and Halliburton did not return repeated calls or e-mails for comment.
KBR, which also has handled lucrative U.S. government
support contracts for U.S. troops in Iraq and elsewhere, was spun off from
Halliburton last year into a separate company.
In its quarterly filing last October, Halliburton said it
was subpoenaed by the Justice Department and SEC over the use -- by a KBR-led
consortium known as TSKJ -- �of an immigration services provider, apparently
managed by a Nigerian immigration official, to which approximately $1.8 million
in payments in excess of costs of visas were allegedly made between
approximately 1997 and the termination of the provider in December 2004 and our
2007 reporting of this matter to the government.�
Halliburton also noted that federal investigators had
�expressed concern regarding the level of our cooperation,� wording that
suggests suspicion of a cover-up or at least foot-dragging.
Halliburton�s April 25 filing marked the first time that
specific evidence was cited to support claims that Halliburton bribed Nigerian
officials in violation of the U.S. Corrupt Foreign Practices Act while Cheney
was the company�s chief executive officer.
The SEC, which regulates companies that sell stock on public
markets as Halliburton does, also has been investigating the case. Halliburton
said it had agreed to extend the statute of limitations related to the
According to previous published accounts of the bribery
scandal, the cash allegedly was laundered through UK lawyer Jeffrey Tesler, who
served as a consultant to KBR after it was formed in a 1998 merger that Cheney
engineered between Halliburton and Dresser Industries.
The bribery investigation was launched in 2003 when Georges
Krammer, a former executive of the French company Technip, a member of the
consortium for the Bonny Island project, informed French magistrate Renaud Van
Ruymbeke that the contracts his group obtained came as a result of payments
Tesler made to Nigerian officials from a slush fund the lawyer allegedly
For more than a year, the magistrate poured over evidence to
determine whether Cheney may have been responsible under French law for at
least one of four bribery payments to the Nigerian officials.
Under French law, �the head of a company can be charged with
�misuse of corporate assets� for bribes paid by any employee -- even if the
executive didn�t know about the improper payments.� Authorities in the UK and
Switzerland also have been investigating the matter.
Legal observers say it is highly unlikely that the U.S.
Justice Department will further implicate Cheney in the scandal even if alleged
bribery did take place on his watch. To date, there has been no direct evidence
indicating that Cheney played a direct role in the bribes.
However, during Cheney�s tenure, Halliburton did expand
operations in Nigeria despite human rights abuses by Gen. Abacha�s regime and
environmental damage to the Niger Delta caused by international oil companies,
Shell and Chevron, both of which signed contracts with Halliburton
In April 2000, Brown & Root Energy Services, a business
unit of Halliburton, was selected by Shell Petroleum Development Co. of Nigeria
to work on the development of an offshore oil and gas facility, the first of
its kind for Shell.
The deal, valued at $300 million, has been questioned by
activists who have tried to hold Shell accountable for the pollution and the
human rights abuses that have harmed Nigerian indigenous groups in a part of
the Niger Delta known as Ogoniland.
In its four-plus decades of oil exploration in Nigeria,
Shell has been responsible for repeated environmental calamities, involving oil
spills, noxious gas flares, cleared forests, despoiled farmland and pipeline
Gen. Abacha�s appreciation for the money that Shell�s
operations put into his coffers made him an eager ally when the oil industry
faced popular protests, which were crushed by the dictator�s army and security
In 1995, the year Cheney joined Halliburton, renowned writer
and environmental advocate Ken Saro-Wiwa and eight of his colleagues were
hanged by the Abacha government for their efforts to prevent Shell from
continuing to poison the environment of the Niger Delta.
It is estimated that more than 2,000 people have been
murdered for their involvement in protests against Shell�s activities in the
Delta. Most of those murdered were Ogoni who had rallied behind Saro-Wiwa in
the early 1990s.
In 1998, Gen. Abacha died of an apparent heart attack.
Aggressive accounting practices
Though Cheney�s five-year tenure at the helm of Halliburton
made him a rich man, controversies surrounding the Houston-based company have
continued to dog him since he became George W. Bush�s vice president.
During the 2004 presidential campaign, the company agreed to
a $7.5 million settlement with the SEC over suspect accounting practices that
took place during Cheney�s affiliation with the company.
The SEC said Halliburton changed the way it accounted for
construction revenues in 1998 and did not report that change to investors for
more than a year, a violation of securities rules.
The accounting sleight-of-hand by Halliburton caused the
company's public statements regarding its income in 1998 and 1999 to be
materially misleading, boosting Halliburton's paper profits by $120 million.
"In the absence of any disclosure, the investing public
was deprived of a full opportunity to assess Halliburton's reported income more
particularly, the precise nature of that income, and its comparability to
Halliburton's income in prior periods," the SEC said.
The changes to the company's accounting practices led to a
"significant difference in their respective effects on Halliburton's financial
presentation: the new practice reduced losses on several large construction
projects" and allowed the company to report a higher profit, the SEC said.
The accounting practices, which gave Wall Street the false
impression that the oil-field services company was profitable between 1998 and
1999, boosted the value of Halliburton's stock and helped Cheney earn more than
$35 million when he sold his shares in 2000.
The New York Times quoted two former Dresser Industries
executives in a May 22, 2002, story as saying that after Cheney guided the
merger of Dresser with Halliburton in 1998, Halliburton "instituted
aggressive accounting practices to obscure its losses."
The accounting change altered the way Halliburton booked
revenues from cost overruns on construction projects. Previously, the company
waited until a figure was agreed upon with a client. After 1998, however,
Halliburton booked revenues that it assumed a customer would pay even though
the agreed-upon number might turn out to be lower.
Halliburton spokeswoman Wendy Hall said at the time that
Cheney "was aware we accrued revenue on unapproved claims in accordance
with generally accepted accounting principles."
The gimmick, signed off on by the now-defunct accounting
firm Arthur Andersen, allowed Halliburton to add $89 million in revenues to its
books in 1998, helping the company beat its earnings target by 2 cents a share
for the year and boosting its stock value.
If the accounting change hadn't been employed, said Wall
Street analysts, the company would have missed its earnings target by 11 cents
a share, which would surely have depressed the stock price.
During Cheney's tenure, accounting irregularities at the
company exceeded $234 million, according to documents obtained by the watchdog
group Center for Public Integrity.
Halliburton also faced allegations that it over-billed for
work at Fort Ord in California under Cheney's watch, a complaint similar to
more recent charges that Halliburton padded its military contract work in Iraq.
Following revelations that Cheney made $35 million from his
sales of Halliburton stock before the company's share price fell on the
announcement in 2000 that the company was being investigated, the Washington
Post on July 16, 2002, summed up Cheney's tenure at Halliburton this way:
"The developments at Halliburton since Cheney's departure leave two
possibilities: Either the vice president did not know of the magnitude of
problems at the oilfield services company he ran for five years, or he sold his
shares in August 2000 knowing the company was likely headed for a fall."
As Halliburton's CEO, Cheney was responsible for
Halliburton's books. He also went out of his way to praise the work done for
Halliburton by Arthur Andersen, the accounting firm that unraveled in 2002
after it was found guilty of obstruction of justice for destroying documents
for another energy-related client, Enron.
In a 1996 promotional video for Arthur Andersen, Cheney
praised the firm for its business advice.
"One of the things I like that they do for us is that,
in effect, I get good advice, if you will, from their people based upon how
we're doing business and how we're operating, over and above the just sort of
the normal by-the-books audit arrangement," he said.
The SEC questioned Cheney during its two-year-long probe of
Halliburton�s accounting irregularities and concluded that he should not be
held responsible for what went on behind the scenes at Halliburton.
Leopold is the author of "News Junkie," a memoir. Visit
www.newsjunkiebook.com for a
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